ANZ Greater China Economic Insight Incl Regional Chartbook - 16 July 2013

7/28/2019 ANZ Greater China Economic Insight Incl Regional Chartbook - 16 July 2013

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ANZ Greater China Economics Weekly Insight / 16 July 2013 / 2 of 23

DATA PREVIEW & REVIEW

GREATER CHINA ECONOMIC DATA CALENDAR

DATE COUNTRY DATA/EVENT PERIOD CONSENSUS LASTTIME

(HK/SG)17 July China Actual FDI (y/y) Jun 0.7% --

18 July Hong Kong Composite Interest Rate Jun -- 0.26%

18 July China Unemployment Rate sa Jun 3.4% 3.4% 16:30

22 July Taiwan Unemployment Rate - sa Jun -- 4.19% 8:30

22 July Taiwan Export Orders (y/y) Jun -- -0.4% 16:00

22 July Hong Kong CPI - Composite Index (y/y) Jun -- 3.9% 16:30

23 July Taiwan Industrial Production (y/y) Jun -- -0.07% 16:00

23 July Taiwan Commercial Sales (y/y) Jun -- -1.85% 16:00

Source: Bloomberg

WEEK IN REVIEW

DATE COUNTRY DATA/EVENT PERIOD CONSENSUS ACTUAL LAST

9 July China CPI (y/y) Jun 2.5% 2.7% 2.10%

9 July China Producer Price Index (y/y) Jun -2.6% -2.7% -2.90%

10 July China Trade Balance (USD) Jun $27.80bn $27.12bn $20.42bn

10 July China Exports (y/y) Jun 3.7% -3.1% 1.0%

10 July China Imports (y/y) Jun 6.0% -0.7% -0.3%

12 July China Foreign Reserves Jun $3470.0bn $3500.0bn $3442.6bn

12 July China New Yuan Loans Jun 800.0bn 860.5bn 667.4bn

12 July China Money Supply - M0 (y/y) Jun 10.5% 9.9% 10.8%



12 July China Aggregate Financing Jun 1275.0bn 1040.0bn 1185.6bn

15 July China Real GDP YTD (y/y) Q2 7.7% 7.6% 7.7%

15 July China GDP (y/y) Q2 7.5% 7.5% 7.7%

15 July China GDP (q/q) Q2 1.8% 1.7% 1.6%

15 July China Industrial Production YTD (y/y) Jun 9.3% 9.3% 9.4%

15 July China Industrial Production (y/y) Jun 9.1% 8.9% 9.2%

15 July China Fixed Assets Investment YTD (y/y) Jun 20.2% 20.1% 20.4%

15 July China Retail Sales YTD (y/y) Jun 12.7% 12.7% 12.6%

15 July China Retail Sales (y/y) Jun 12.9% 13.3% 12.9%

15 July China Business Climate Index Q2 --- 120.6 125.6

15 July China Entrepreneur Confidence Index Q2 --- 117.0 122.4

Source: Bloomberg




GREATER CHINA CHARTBOOK

OVERVIEW: CHINA’S GDP SLOWED FURTHER IN Q2

• China: China’s Q2 GDP growth slowed further to 7.5% y/y, down from Q1’s 7.7%, putting at risk the 7.5%

growth target set this year. The slowing growth was mainly dragged by declining industrial production(8.9% y/y in June vs 9.2% in May) and worsening export conditions (-3.1% y/y in June vs +1.0% in May).We believe monetary policy inaction and even policy mistakes in handling the surging interbank rates,have also contributed to cooling economic growth.

• Looking forward, some downside risks remain: First, the unemployment pressure will rise significantlybecause of lost trade competitiveness and a record number of new graduates entering the job market thisyear. Second, high money market rates and deleveraging by commercial banks will spill over to the real

sector. The small and medium enterprises will feel most of the brunt, further increasing the volatility of thissector. Third, local government financing platforms could quickly become a lot more fragile.

• To head off such risks, the government will need to take prompt policy actions. Monetary policy mustchange to reflect the rapidly changing domestic and external conditions. An interest rate cut is longoverdue, and a reserve requirement ratio cut should not be excluded if capital flight were to occur. China’sfiscal policy is still effective as the country still has plenty of room to invest: urban infrastructure,technology upgrading, and human capital. Finally, reforms and opening up of the financial sector will alsohelp instil confidence on China’s future growth prospects.

• We believe these policy reactions should allow China to grow at around 7.6% this year with CPI inflationfalling to a range of 2.5 to 3.0%.

• These policies will have major implications for domestic rates and the RMB exchange rate. Market ratesshould see a general downward trend and the RMB should continue to weaken in the second half, not onlyagainst the USD but also its Asian crosses.

• Taiwan: Exports grew by a surprisingly large margin in June on the back of strong demand from ASEANand Mainland China. The electronics sector stayed resilient although household consumption remainedweak. GDP is forecasted to have grown modestly by 1.89% y/y in Q2. Our recent client visits also suggestthat the electronic sector remains upbeat. Taiwan’s external demand will likely recover in the second half.

• Hong Kong: As China has tightened over-invoicing and round tripping in trade, goods flow in Hong Konghas started to decline. Fortunately, domestic consumption holds up well as high property prices continue topreserve household wealth. HKD HIBOR barely rose despite the US tapering concern.

China - GDP Growth

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 2008 2009 2010 2011 2012 2013

y/y q/q , saar

China - Contribution to GDP Growth

-5

0

5

10

15

20

02 03 04 05 06 07 08 09 10 11 12 13H1

Consumption Investment Net Exports GDP, y/y

Taiwan - Trade Developments

-20

-10

0

10

20

30

40

50

Jun

11

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

-2

-1

0

1

2

3

4

5

Trade Balance, $bn (RHS) Exports, y/y Imports, y/y

Hong Kong - 1-month HKD HIBOR

0.20

0.22

0.24

0.26

0.28

0.30

0.32

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul

13

1m HKD HIBOR

Sources: Bloomberg, CEIC, ANZ




CHINA

REAL ACTIVITY: GDP SLOWED TO 7.5%, BARELY MEETING THE GOVERNMENT’S ANNUAL TARGET

• Q2 GDP slowed to 7.5% y/y, down from Q1’s 7.7%, in line with market expectations. In the first half of

the year, GDP grew 7.6% y/y. The primary, secondary and tertiary industries grew by 3.0%, 7.6% and8.3% respectively in H1. By expenditure, consumption and investment contributed 3.4ppts and 4.1pptsrespectively to overall growth in H1, while net exports contributed 0.1ppt. On a q/q basis, the economyrose 1.7%, 0.1ppt higher than in Q1.

• Industrial production growth slowed to 8.9% y/y in June, compared with 9.2% in May. However,electricity production growth rebounded to 6.0%, from 4.1% in the previous month. In H1, industrialproduction grew 9.3% y/y while electricity production increased 4.4%.

• Fixed asset investment eased slightly to 20.1% y/y in H1, compared with 20.4% in January-May.

• Retail sales grew 13.3% y/y in June, from 12.9% in May. For H1, retail sales increased 12.7%.

China - GDP Growth

0

2

4

6

8

10

12

14

16

18

20

2005 2006 2007 2008 2009 2010 2011 2012 2013

y/y q/q, saar

China - Contribution to GDP Growth

-5

0

5

10

15

20

02 03 04 05 06 07 08 09 10 11 12 13H1

Consumption Investment Net Exports GDP, y/y

China - Industrial Production and Electricity

Production (y/y)

-5

0

5

10

15

20

25

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

5

7

9

11

13

15

17

19

2123

Electricity Production Industrial Production (RHS)

China - Fixed Asset Investment

(ytd, y/y)

0

5

10

15

20

25

30

35

40

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

To ta l FAI SOE Priva te

China - Retail Sales(y/y)

5

10

15

20

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Nomina l Real

China - Housing and Auto Sales Volume(y/y)

-40

-30

-20

-10

0

10

20

30

40

50

60

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Auto Sales Housing Sales

Sources: NBS, CEIC, ANZ




CHINA

EXTERNAL TRADE: TRADE FIGURES REFLECT REALITY

• After the crackdown on over-invoicing and round tripping trade figures since May, the Chinese tradefigures are beginning to reflect reality. June trade figures continued to trend down, reflecting thatChina’s external demand remains weak. Export contracted by 3.1% y/y and imports extended thenegative growth at -0.7% y/y in June, compared with May’s 1.0% and -0.3%, respectively. The tradesurplus widened to USD27.1bn.

• By destination, exports to the US fell 5.4% y/y in June, from a 1.6% decline in May. Exports to the EUcontracted 8.3%, from -9.7% in the previous month. Exports to Japan declined 5.1%, from -5.7%.Exports to Hong Kong fell sharply to -7.0%, from a 7.7% increase in the previous month. Exports toASEAN rose 10.2%, while shipments to Taiwan fell 2.2%.

China - Trade Developments

-40

-30

-20

-10

0

10

2030

40

50

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

-40

-30

-20

-10

0

10

2030

40

50


China's exports vs regional exports

(y/y)

-30

-20

-10

0

10

20

30

40

50

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

China Hong Kong Korea Taiw an

China - Exports by Destination

(y/y, 3mma)

-20

-10

0

10

20

30

40

50

60

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

US EU NIE ASEAN

China - Imports by Origin

(y/y, 3mma)

-10

0

10

20

30

40

50

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

US EU NIE ASEAN

China - Trade Balance

($bn 12m rolling sum)

100

120

140

160

180

200

220

240

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

-70

-60

-50

-40

-30

-20

-10

0

EU US Japan (RHS)

China - Trade Balance

($bn 12m rolling sum)

-200

-150

-100

-50

0

50

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

ASEAN-5 AU+NZ NIE ex HK





CHINA

PRICES: REBOUNDING INFLATION DUE TO A LOW BASE COMPARISON

• China’s CPI inflation rebounded to 2.7% in June, from May’s 2.1%, largely due to a low base last year.

Food and rental costs rose 4.9% and 3.1% respectively in June, from 3.2% and 3.0% in the priormonth. Meanwhile, on a m/m basis, CPI remained unchanged in June, compared with a 0.6% declinethe prior month. On a sequential basis, CPI inflation in June remained unchanged from May.

• PPI inflation remained negative for 16 consecutive months, indicating firms have little power to raiseprices due to the lack of demand. As there is a pass-through effect from PPI inflation to CPI inflation, aweak PPI inflation result also suggests that the CPI is unlikely to pick up in the next 1-2 quarters.

• We maintain our forecast that average CPI inflation will be around 2.5% for the whole of 2013, muchlower than the government target of 3.5%.

China - Inflation

(y/y)

-6

-4

-2

0

2

46

8

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

CPI PPI

China - Contribution to Inflation

(y/y)

-1

0

1

2

3

45

6

7

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Food Housing Medical Other CPI

China - CPI Inflation

-4

-2

0

2

4

6

8

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

-1

0

1

2

m/m (RHS) y/y

China - PPI Inflation

-10

-8

-5

-3

0

3

5

8

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

-2

-1

0

1

2

m/m (RHS) y/y

China - Real Interest Rate

-4

-2

0

2

4

6

8

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

CPI, y/y Deposit Rate Rea l Interest Rate

China Food Price Index

140

150

160

170

180

190

200

210

220

230

Sep

09

Dec

09

Mar

10

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Sources: CEIC, ANZ




CHINA

MONETARY POLICY: POLICY CHANGES ARE URGENTLY NEEDED TO INSTIL CONFIDENCE

• New yuan loans came in at RMB860.5bn in June, slightly above market consensus. However, total

social financing eased to RMB1.04trn, from RMB1.19bn in the previous month. M2 growth moderated to14.0% y/y in June, from 15.8% in May, reflecting slower deposit growth.

• While liquidity conditions have eased significantly in the past few weeks, the 7-day repo rate, the most

important gauge of the liquidity environment, continued to trade above 3.5%, much higher than thenormal level of 3%. This suggests that the PBoC is maintaining an overall tight liquidity condition inChina’s onshore market despite soft growth and inflation outlooks, which has increased theuncertainties of the policy outlook in the next 1-2 quarters.

• We reiterate our view that the monetary authority should anchor its monetary policy based on forward-looking inflation, growth and employment dynamics. This requires the PBoC to first cut interest rates tolower both interbank rates and cost of funding in the real economy. If China were to experience largecapital outflows with the expectation of QE tapering in the US, the PBoC could act accordingly bycutting the reserve requirement ratio.

China - PBoC 1-year Lending Rate

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

2006 2007 2008 2009 2010 2011 2012 2013

China - Reserve Requirement Ratio

4

6

8

10

12

14

16

18

20

22

24

2006 2007 2008 2009 2010 2011 2012 2013

China - M2 and Credit

10

15

20

25

Dec10

Mar11

Jun11

Sep11

Dec11

Mar12

Jun12

Sep12

Dec12

Mar13

Jun13

M2, y/y Credit, y/y

China - Total Social Financing

(RMB bn)

0

2,000

4,000

6,000

8,000

10,000

12,000

T o t a l S o c i a l

F i n a

n c i n g

R M

B L o a n

F o r e i g n

C u

r r e n c y

L o a n

E n t r u s t e d

L o a n

T r u s t L o a n

B a n k e r ' s

A c c e

p t a n c e

D

r a f t

N e

t C o r p

B o n d

N o n -

F i n a n c i a l

E q u i t y

H1 2012 H1 2013

China - New Yuan Loans

(RMB bn)

0

200

400

600

800

1,000

1,200

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

China - PBoC Weekly Open Market Operations

(RMB bn)

-200-150

-100

-50

0

50

100

150

200

250

25

Mar

08

Apr

22

Apr

06

May

20

May

03

Jun

17

Jun

01

JulC B Bill Matured Repo Matured Reverse Repo

CB Bill Repo Rev. Repo Matured

Net

Liquidity Injection

Liquidity Withdrawal

Sources: Bloomberg, CEIC, PBoC, ANZ




CHINA

EXCHANGE RATE: RMB SHOULD START TO DEPRECIATE IN THE SECOND HALF

• The strong yuan is a major culprit behind the loss of export competitiveness. We believe that the

Chinese authorities should re-visit their exchange rate policy amid the weakness of the Asian peers. Infact, the RMB strengthening since last June is largely driven by Mainland-Hong Kong cross border trademasking capital inflows induced by the onshore and offshore interest rate differentials, rather than realtrade. As a weaker RMB is in China’s interest to help the export sector and regain China’s tradecompetitiveness, we believe the RMB should depreciate in the second half of the year, and year-endrates should be around 6.20 or even weaker. Slower capital inflows or even capital outflows due toexpectations of US QE tapering will help alleviate the pressures on the RMB as well.

• Given a strong yuan relative to other Asian currencies, export competitiveness will continue to erode.With this in mind, we see a downside risk for the RMB exchange rate. In the long term, we believe thenew political leadership should roll out a clear strategy to re-position China’s products within the globalsupply chain.

USD/CNY

6.05

6.10

6.15

6.20

6.25

6.30

6.35

6.40

6.45

Jun

12

Jul

12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

Jun

13

Jul

13

Spot Trading band Fixing

China - CNY and CNH Spot

6.10

6.14

6.18

6.22

6.26

Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 Jul 13

-300

-200

-100

0

100

200

300

400500

Spread (pips, RHS) USD/CNY USD/CNH

USD/CNY Spot and NDF

6.1

6.2

6.3

6.4

6.5

Jul12

Aug12

Sep12

Oct12

Nov12

Dec12

Jan13

Feb13

Mar13

Apr13

May13

Jun13

Jul13

-4

-3

-2

-1

0

1

2

3

NDF Implied Appreciation, % (RHS) USD/CNY 1y NDF

USD/CNY Spot and DF

6.1

6.2

6.3

6.4

6.5

Jul

12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

Jun

13

Jul

13

-4

-3

-2

-1

0

1

2

3

DF Implied Appreciation, % (RHS) USD/CNY 1y DF

China - Monthly Change of Financial Institutions

FX Position (RMB bn)

-200-100

0

100

200

300

400

500

600

700

800

Jan

09

May

09

Sep

09

Jan

10

May

10

Sep

10

Jan

11

May

11

Sep

11

Jan

12

May

12

Sep

12

Jan

13

May

13

CNY Exchange Rate

(Index: 1 Jan 2012 = 100)

90

95

100

105

110

115

120

125

130

135

140

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul

13

CNY/EUR CNY/JPY CNY/AUD CNY/USD

CNY Appreciation





CHINA

PROPERTY MARKET: PRICES SURGED IN FIRST TIER CITIES

• Property prices continued to heat up in May. Our calculation showed that property prices picked up to

6.5% y/y in May, compared with 5.3% in April. Notably, the average prices in first tier cities surged 14.2%in May, compared with an average 5.1% in the rest of the 70 cities. Housing prices in Beijing, Shanghai,Guangzhou and Shenzhen increased 15.2%, 12.2%, 15.5% and 14.0% respectively.

• By number of cities, the prices rose in 65 of 70 cities m/m in May, down from 67 in April. On a y/y basis,prices increased in 69 cities, Wenzhou was the only city that saw prices decline. Meanwhile, transactions in

major cities continued to slow down in May.

China - Property Price Index

(y/y)

-4

-2

0

2

4

6

8

10

12

14

16

18

2005 2006 2007 2008 2009 2010 2011 2012 2013

Official Property Price Index ANZ Property Price Index

China - First Tier City New Residential Property

Prices (y/y)

-4

-2

0

2

4

6

8

10

12

14

16

18

May

11

Jul

11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Beijing Shanghai Guangzhou Shenzhen

China - 70 City New Residential Property Price

(number of cit ies m/m change)

0

10

20

30

40

50

60

70

May

11

Jul

11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Decrease No Change Increase

N u m b e r o f C i t i e s

China - 70 City New Residential Property Price

(number of cities y/y change)

0

10

20

30

40

50

60

70

May

11

Jul

11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Decrease No Change Increase

N u m b e r o f C i t i e s

China - First Tier City Property Transactions

(thousand sq m, 30-day moving sum)

0

500

1,000

1,500

2,000

2,500

3,000

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul

13

0

100

200

300

400

500

600

700

Beijing Shanghai Guangzhou Shenzhen (RHS)

China - Floor Space Started and Sold

(y/y)

-40

-30

-20

-10

0

10

20

30

40

5060

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

Floor Space Started Floor Space Sold





CHINA

STEEL INDUSTRY: IRON ORE PRICES REBOUNDED SLIGHTLY

• The Tianjin Port imported iron ore prices rebounded to above USD125 per ton at mid-July. Iron ore

inventory also started to climb slowly, but remained well below the average level of the past 5 years.• Steel prices, however, continued to decline. Steel inventories held by traders also continued the

downward trend, consistent with past seasonality paterns.

China - Import Iron Ore Price 62% Fe

(USD/ton)

8090

100

110

120

130

140

150

160

170

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

CFR Tianjin Port

China - Iron Ore Inventory at Ports

(mn tons)

50

55

60

65

70

75

80

85

90

95

100

105

Dec

09

Mar

10

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Iron Ore Inventory 5 year average

China - Steel Inventory and Rebar Price

3

4

5

6

7

8

9

10

Jun

09

Oct

09

Feb

10

Jun

10

Oct

10

Feb

11

Jun

11

Oct

11

Feb

12

Jun

12

Oct

12

Feb

13

Jun

13

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

Steel inventories held by traders in major cities, m ton

Domestic rebar price, RMB/ton (RHS)

China - Steel Product Prices

(th RMB/ton)

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Rebar Hot Rolled Sheet Steel P late Cold Rolled Sheet

China - Industrial Production Growth vs Ferrous

Metal Smelting & Pressing (y/y)

0

5

10

15

20

25

Jan

11

Mar

11

May

11

Jul

11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13Headline Industrial Production

Smelting & Pressing of Ferrous Metals

China - Domestic Demand of Imported Ore

(m tons)

0

10

20

30

40

5060

70

80

90

Nov

09

Feb

10

May

10

Aug

10

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

*Defined as monthly imports less monthly change of inventories





TAIWAN

REAL ACTIVITY: INDUSTRIAL PRODUCTION IMPROVED DUE TO ELECTRONICS

• Industrial production inched down 0.07% y/y in May, compared with -0.80% in the previous month.

Sequentially, industrial production gained 0.98% m/m after seasonal adjustments. The improvementwas driven by the robust semiconductors sector as electronics manufacturing expanded 3.47% y/y inMay. The base metal industry contracted 7.37% while chemicals declined 3.66%, suggesting that theeconomic conditions for “conventional industries” remain challenging.

• Domestic demand performed poorly. Commercial sales contracted 1.85% y/y in May, from a 1.01% gainin April, mainly due to a 2.63% decline in wholesale sales. Meanwhile, retail sales increased marginallyby 0.11%.

• Given continued sluggish domestic demand and stable exports, Taiwan’s GDP is forecast to have grownby 1.89% y/y in Q2. Going forward, the improving US economy likely helped lift the pace of recovery inH2, given that the global electronics industry remains upbeat.

Taiwan - Real GDP Growth

-10

-5

0

5

10

15

20

25

Mar

09

Jul

09

Nov

09

Mar

10

Jul

10

Nov

10

Mar

11

Jul

11

Nov

11

Mar

12

Jul

12

Nov

12

Mar

13

y/y q/q, saar

Taiwan - Contributions to GDP Growth

(ppt)

-6

-4

-20

2

4

6

81012

14

Jun

10

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Private Consumption Government Consumption

Investment Change in Stocks

Net Exports y/y

Taiwan - Economic Activities

(y/y)

-25

-20

-15

-10

-5

0

5

10

15

20

25

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

Commercial sales Industrial production

Exports Imports of Machineries

Export orders

Taiwan - Commercial Sales

(y/y)

-15

-10

-5

0

5

10

15

20

25

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

Commercial Sales Wholesale Trade Retail Trade

Taiwan - Industrial Production Index

-20

-15

-10

-5

0

5

10

15

20

25

Nov10

Feb11

May11

Aug11

Nov11

Feb12

May12

Aug12

Nov12

Feb13

May13

40

50

60

70

80

90

100

110

120

y/y Index (RHS)

Taiwan - Industrial Production

of Major Sectors

(y/y)

-40

-20

0

20

40

60

80

Nov10 Feb11 May11 Aug11 Nov11 Feb12 May12 Aug12 Nov12 Feb13 May13

Electronic Parts Basic Metal

Chemical Materials Tech Products

Sources: CEIC, ANZ




TAIWAN

EXTERNAL TRADE: EXPORTS SURPRISED ON THE UPSIDE IN JUNE

• Taiwan’s exports surprised on the upside with a 8.6% y/y gain in June, mainly driven by strongshipments to ASEAN (+20.3%) and Mainland China (8.6%). By product, electronics continued to buffer

Taiwan’s trade performance, growing 10.9% y/y. Meanwhile, mineral exports, which include oil fuels,surged 39.4%. On a sequential basis, exports rose by 0.5% m/m.

• Imports increased 6.1%, from -8.0% in May, also beating market consensus. Notably, imports of capitalequipment increased 7.5%, reflecting a robust investment demand. The trade surplus narrowed toUSD3.25bn in June, from a record high of USD4.46bn in May.

• On the other hand, export orders declined 0.4% y/y in May, from a 1.1% contraction in April, slightlybetter than market expectations. The declining demand from China, ASEAN and the US appears to havestabilized with some markets starting to restock. Excluding the change of export orders from Japan,which has suffered from a currency valuation effect, the headline growth should have been 1.3% y/y.

Taiwan - Trade Developments

-20

-10

0

10

20

30

40

50

Jun

11

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

-2

-1

0

1

2

3

4

5


Taiwan - Exports Comparison with South Korea

(y/y)

-20

-15

-10

-5

0

5

10

1520

25

30

Jun

11

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

Taiwan South Korea

Taiwan - Exports by Destination

(y/y)

-40

-30

-20

-10

0

10

20

30

40

50

Jun11

Aug11

Oct11

Dec11

Feb12

Apr12

Jun12

Aug12

Oct12

Dec12

Feb13

Apr13

Jun13

Asia ex Ma inland & HK HK Ma inland Europe US

Taiwan - Imports by Origin

(y/y)

-40

-30

-20

-10

0

10

20

30

40

50

60

Jun

11

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

-90

-60

-30

0

30

60

90

120

150

180

Asia ex Ma inland & HK Ma inlandEurope US

HK (RHS)

Taiwan - Export Orders

-20

-10

0

10

20

30

40

May

10

Aug

10

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

20,000

23,000

26,000

29,000

32,000

35,000

38,000

41,000

44,000

y/y Export Orders in USD (RHS)

Export Orders 12mma

Taiwan - Export Orders by Market

(y/y)

-30

-20

-10

0

10

20

30

40

Jul11

Sep11

Nov11

Jan12

Mar12

May12

Jul12

Sep12

Nov12

Jan13

Mar13

May13

China/HK Europe Japan ASEAN6 US

Sources: CEIC, ANZ




TAIWAN

PRICES: INFLATIONARY PRESSURES CONTINUED TO EASE IN JUNE

• Headline CPI inflation eased further to 0.60% y/y in June, compared with 0.74% in May, largely due tolower food inflation, which has eased to 0.48% y/y. Core inflation, which excludes food and energy, rose

to 0.33% in June, from 0.28%.

• WPI fell 1.90% y/y in June, compared with -3.33% in the previous month and the market consensus of a 2.35% decline. Overall, WPI continued to be negative as prices of base metals, electronic componentsand other minerals remained depressed. However, sequentially, WPI gained 0.75% m/m sa.

• Going forward, the strength of TWD against USD and JPY will contine to help fend off imported inflation.Inflation is unlikely to be a major risk factor for the rest of the year.

Taiwan - CPI Momentum & Output Gap

-10

-8

-6

-4

-2

0

2

4

6

2006 2007 2008 2009 2010 2011 2012

GDP Actual-Potential Gap, % CPI

Taiwan - Contribution to CPI Inflation

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

Jun

13

Food Rental

Hous ing ex. Renta l Transporta tion

Education & Entertainment Other

CPI, y/y

Taiwan - Headline and Core CPI

-1.0

-0.5

0.0

0.5

1.0

1.5

2.02.5

3.0

3.5

4.0

Dec10

Mar11

Jun11

Sep11

Dec11

Mar12

Jun12

Sep12

Dec12

Mar13

Jun13

CPI

CPI ex Food & Energy

CPI ex Fruits, Vegetables, Fish, Shellfish & Energy

Taiwan - CPI and Real Interest Rate

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Jun

13

Real interest rate: 1-year Term Deposits minus CPI Inflation 3mma

CPI y/y 3mma

Taiwan - WPI

-6

-4

-2

0

2

4

6

8

10

Dec10

Mar11

Jun11

Sep11

Dec11

Mar12

Jun12

Sep12

Dec12

Mar13

Jun13

-3

-2

-1

0

1

2

3

4

5

m/m sa (RHS) y/y

Taiwan - Import Price Index

(y/y)

-10

-5

0

5

10

15

20

25

Dec10

Mar11

Jun11

Sep11

Dec11

Mar12

Jun12

Sep12

Dec12

Mar13

Jun13

ImPI in TWD ImPI in USD

Sources: CEIC, ANZ




TAIWAN

MONETARY AND RATE POLICIES: CBC HELD INTEREST RATE AT 1.875% AS EXPECTED

• Taiwan’s central bank (CBC) held the policy rate at 1.875% in June, in line with market expectations.

Low inflation and sluggish growth continue to prompt the CBC to remain accommodative as the currentinterest rate level has been considered appropriate. Furthermore, the central bank is also watchingclosely the highly uncertain financial markets. The changing monetary policy stance of other majorcentral banks is also on the radar. Against this global backdrop, we believe the CBC will continue to actprudentially and maintain a stable monetary policy stance.

• Taiwan’s bond yield has risen sharply on the back of rising US Treasury yields. Thus, given the taperingbias of US monetary policy going forward, Taiwan’s interest rates will also be subject to an upward bias.On the exchange rate front, the CBC will continue to strive for a balance between exportcompetitiveness and the risk of imported inflation when formulating its view on TWD exchange rates.

• RMB deposits rose 7.4% m/m to RMB71.2bn in June.

Taiwan - Money Supply

(y/y)

0

1

2

3

4

5

6

7

8

910

Nov10

Feb11

May11

Aug11

Nov11

Feb12

May12

Aug12

Nov12

Feb13

May13

M1b M2

Taiwan - Money Market Interest Rates (bps)

0

20

40

60

80

100

120

140

160

180200

Oct10

Jan11

Apr11

Jul11

Oct11

Jan12

Apr12

Jul12

Oct12

Jan13

Apr13

Jul13

90-day Commercial Paper Interbank Overnight Rate

Rediscount Rate 10 yr Gov't Bond Yie ld

Taiwan - TWD Exchange Rates

95

97

99

101

103

105

107

Apr

11

Jun

11

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

28

28

29

29

30

30

31

BIS NEER BIS REER TWD/USD Spot (RHS, inverted)

Taiwan - USDTWD vs USDKRW

(One year rolling index)

90

92

94

96

98

100

102

Jul

12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

Jun

13

Jul

13

USDTWD USDKRW

Taiwan - RMB Deposits

(RMB mn)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

OBU DBU

Taiwan - Real Estate Loans

-30

-20

-10

0

10

20

30

40

50

60

70

80

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

42.0

42.5

43.0

43.5

44.0

44.5

Real Estate Loan, TWD bn

RE Loan as % of Banks' Loan Book (RHS)

Sources: CEIC, ANZ




HONG KONG

REAL ACTIVITY: GROWTH MOMENTUM OF DOMESTIC ACTIVITY REMAINED MODEST

• Retail sales grew 12.8% y/y in May, compared with 20.7% in April and market expectations of 19.4%.Sales of jewellery, watches and valuable gifts grew 34.5%, much slower than the 68.5% gain in April, asthe first wave of gold-buying occurred in April after gold prices slumped. In addition, consumer durablegoods also declined 9.5% y/y, from a 0.8% gain the previous month, driven by slow sales of motorvehicles.

• Seaborne cargo remained depressed, despite the resumption of port workers after a long strike.Container throughput by seas contracted 10.5% y/y in May, from the previous contraction of 12.2% inApril. Meanwhile, air cargo throughput rose 10.7% y/y in June, from 12.4% the previous month.

Hong Kong - Contributions to GDP Growth

(ppt)

-10

-5

0

5

10

15

Sep

10

Dec

10

Mar

11

Jun

11

Sep

11

Dec

11

Mar

12

Jun

12

Sep

12

Dec

12

Mar

13

Private Consumption Government Consumption

Investment Changes in Inventories

Net Exports Total, y/y

Hong Kong - GDP

-4

-2

0

2

4

6

8

10

12

Mar10

Jun10

Sep10

Dec10

Mar11

Jun11

Sep11

Dec11

Mar12

Jun12

Sep12

Dec12

Mar13

y/y q/q, saar

Hong Kong - Retail Sales

(y/y)

0

5

10

15

20

25

30

35

Nov10

Feb11

May11

Aug11

Nov11

Feb12

May12

Aug12

Nov12

Feb13

May13

Value Volume

Hong Kong - Retail Sales Components

(y/y)

-40

-20

0

20

40

60

80

May11

Jul11

Sep11

Nov11

Jan12

Mar12

May12

Jul12

Sep12

Nov12

Jan13

Mar13

May13

C lothing & Footwear Motor Vehicles

Jewellery, Watches & Clocks

Hong Kong - Unemployment Rate

0

2

4

6

8

10

12

14

May

09

Sep

09

Jan

10

May

10

Sep

10

Jan

11

May

11

Sep

11

Jan

12

May

12

Sep

12

Jan

13

May

13

Construction Overall economy Finance & Bus. Services

Hong Kong - Logistics Activities

(y/y)

-20

-15

-10

-5

0

5

10

15

20

25

Aug11

Oct11

Dec11

Feb12

Apr12

Jun12

Aug12

Oct12

Dec12

Feb13

Apr13

Jun13

Container Throughput (Sea) Passenger Movement (Air)

Air Cargo Throughput

Sources: CEIC, ANZ




HONG KONG

EXTERNAL SECTOR: TRADE SLOWED SIGNIFICANTLY AS CHINA CLAMPS DOWN ON FALSE TRADE

• Exports dropped by 1.0% y/y in May, compared with a 9.0% gain in April, consistent with the declining

pattern of China’s trade. The large drop in exports growth was primarily due to exports to Mainland,which declined significantly due to the Mainland’s cracking down of over-invoicing. Exports to Chinagrew a mere 0.7%, compared with 15.7% in April. Additionally, exports to the US and EU also declinedby 7.9% and 7.0% respectively, from -3.6% and -0.6%.

• Imports increased by 1.7% y/y in May, from 7.7% in April, and also lower than market expectations. Asthe cross-border financially-driven trades started to slow, imports from China also declined. The tradedeficit widened by HKD1.6bn to HKD44.3bn in May.

Hong Kong - Trade Developments

-50

-40

-30

-20

-10

0

10

20

30

40

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

Trade Balance, HKD bn Exports, y/y Imports, y/y

Hong Kong - Exports by Destination

(y/y)

-30

-20

-10

0

10

20

30

40

May11

Jul11

Sep11

Nov11

Jan12

Mar12

May12

Jul12

Sep12

Nov12

Jan13

Mar13

May13

US EU NIE ASEAN China

Hong Kong - Regional Contributions to Export

Growth (ppt)

-20

-15

-10

-5

0

5

1015

20

May

12

Jun

12

Jul

12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

ASEAN EU US China

Japan NIEs Other Total, y/y

Hong Kong - Regional Contributions to Import

Growth (ppt)

-25

-20

-15

-10

-5

0

5

10

1520

25

30

Jun

12

Jul

12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

ASEAN EU US China

Japan NIEs Other Total, y/y

Hong Kong - Product Contributions to ExportGrowth (ppt)

-20

-15

-10

-5

0

5

10

15

20

Jun

12

Jul

12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

C hemicals Manufactures by Materials

Machinery, Transport Equip Misc Manufactures

Other Total, y/y

Hong Kong - Product Contributions to ImportGrowth (ppt)

-25-20

-15-10-50

5101520

2530

Jun

12

Jul

12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

C hemicals Manufactures by Materials

Machinery, Transport Equip Misc Manufactures

Other Total, y/y

Sources: CEIC, ANZ




HONG KONG

PRICES: CPI INFLATION EASED SLIGHTLY IN MAY

• Headline CPI eased to 3.9% y/y in May, slightly below the previous reading of 4.0%. Food inflation

eased to 4.0% in May, from 5.2% in April as vegetable prices rose slower. On the other hand, housingprices accelerated to 6.2% from 5.9% on the back of rising private rentals.

• Going forward, Hong Kong’s inflation still has upward pressure. With public services including MTR(Hong Kong’s subway) raising its fares and the government inclined to pledge the relief measures nomore than the previous, Hong Kong will likely run an inflation scenario unless there is a substantialreduction in economic activities triggered by a crisis-like event.

Hong Kong - CPI Inflation

0

1

2

3

4

5

6

7

8

9

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

Headline, y/y Excl. Gov't Relief, y/y

Hong Kong - Contribution to Inflation

-2

-1

0

1

2

3

4

5

Jul

12

Aug

12

Sep

12

Oct

12

Nov

12

Dec

12

Jan

13

Feb

13

Mar

13

Apr

13

May

13

Food Housing

Electricity, Gas & Water Transport

Misc services Others

y/y

Hong Kong - Inflation

(y/y)

-10

-5

0

5

10

15

20

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

-40

-30

-20

-10

0

10

20

30

Food Housing Transport E lect ., Gas & Water (RHS)

Hong Kong - CPI and CNY

0

1

2

3

4

5

6

7

8

9

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

1.12

1.14

1.16

1.18

1.20

1.22

1.24

1.26

1.28

CPI, y/y HKD/CNY (RHS)

Hong Kong - CPI and Liquidity

0

2

4

6

8

10

12

14

1618

1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

-8

-4

0

4

8

12

16

3m HIBOR CPI, y/y (RHS)

Hong Kong - CPI and Unemployment Rate

0

1

2

3

4

5

6

7

89

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

3.0

3.2

3.4

3.6

3.8

4.0

4.2

CPI, y/y Unemployment Rate, sa (RHS)

Sources: CEIC, ANZ




HONG KONG

MONEY AND BANKING: CNH HIBOR AFFECTED BY THE ONSHORE LIQUIDITY SQUEEZE

• Broad money M2 growth accelerated to 13.4% y/y in May, from 10.3% in April, driven by the stronggrowth of foreign currency deposits that reported a 14.8% gain (April: 9.8%). Sequentially, M2increased by 1.2% m/m.

• Hong Kong’s RMB deposit increased by 3.1% y/y in May, reaching RMB698.5bn at the end of the month.Cross border trade settlement also rose to RMB318.1bn in May, from RMB275.4bn in April, partlyreflecting the strong cross border trade that took place in previous months.

• The onshore liquidity crunch that started in June has had a large impact on Hong Kong’s CNH interestrates. In late June, the CNH HIBOR fixing curve, released by the TMA in June, became inverted as shortterm interest rates surged on the back of tightening liquidity conditions onshore, which caused onshore

market interest rates to surge. As onshore rates declined in July, the offshore CNH HIBOR also declinedand the curve is no longer inverted. This shows that despite capital controls, the onshore CNY marketstill heavily influences the offshore CNH market. (See ANZ CNH Market Monitor 3 July 2013)

Hong Kong - Money Supply

-5

0

5

10

15

20

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

M2, y/y M2, m/m

Hong Kong - HKMA Aggregate Balance

(HKD bn)

0

50

100

150

200

250

300

350

2007 2008 2009 2010 2011 2012 2013

0

5

10

15

20

25

30

Daily Change (RHS) HKMA Aggregate Balance

Hong Kong - HKD Loan and Deposits

74

76

78

80

82

84

86

88

May

11

Jul

11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

0

5

10

15

20

25

Loan-to-deposit Ratio Loans, y/y (RHS)

Hong Kong - CNH HIBOR Fixing Curve

0

1

2

3

4

5

6

7

8

ON 1W 2W 1M 2M 3M 6M 1Y

24/06/2013 15/07/2013

Hong Kong - RMB Trade Settlement

0

50

100

150

200

250

300

350

400

Oct

10

Jan

11

Apr

11

Jul

11

Oct

11

Jan

12

Apr

12

Jul

12

Oct

12

Jan

13

Apr

13

0

20

40

60

80

100

120

140

Ratio to HK-China Trade (RHS)

Ratio to Total HK Trade (RHS)

Ratio to China Total Trade (RHS)

Trade settlement amount (3mma), RMBbn

Hong Kong - RMB Deposits and Cross-Border

Trade Settlement

0

100

200

300

400

500

600

700

800

May09

Sep09

Jan10

May10

Sep10

Jan11

May11

Sep11

Jan12

May12

Sep12

Jan13

May13

0

2

4

6

8

10

12

Deposit, RMBbn

Trade se ttlement amount, RMBbn

RMB as % of Total Deposits (RHS)

Sources: CEIC, ANZ

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https://anzlive.secure.force.com/servlet/servlet.FileDownload?file=00PD000000J1mwjMAB




HONG KONG

REAL ESTATE: HKMA WARNS BANKS OF POTENTIAL MORTGAGE RISK

• Hong Kong’s property prices held up well, despite a large decline in transaction volumes. The Centa City

Leading Index was little changed from a month ago on 7 July 2013, and property prices held firm after amodest correction that started in Q2. Meanwhile, residential property transactions remained depressed,declining by 22.2% m/m in June in value terms.

• It has been reported by the local media that banks in Hong Kong have recently started to offer lowerHIBOR-linked mortgage rates and packages to attract new loans. However, the Hong Kong MonetaryAuthority (HKMA) has warned banks of mortgage risks and reportedly provided window guidance.

• The upside risk of the US interest rate will continue to cloud Hong Kong’s property outlook whilegovernment measures to curb transactions may start to prevent the price adjustment process.Policymakers are advised to act pre-emptively and flexibly in view of changing market conditions.

Hong Kong - Centa City Leading Index

50

60

70

80

90

100

110

120

130

Jan

09

May

09

Sep

09

Jan

10

May

10

Sep

10

Jan

11

May

11

Sep

11

Jan

12

May

12

Sep

12

Jan

13

May

13

Hong Kong - Residential Property Transactions

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

Jun

10

Oct

10

Feb

11

Jun

11

Oct

11

Feb

12

Jun

12

Oct

12

Feb

13

Jun

13

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Number of Transactions (RHS) Value, HKD mn

Hong Kong - Housing Market

140

160

180

200

220

240

260

Nov

10

Feb

11

May

11

Aug

11

Nov

11

Feb

12

May

12

Aug

12

Nov

12

Feb

13

May

13

30

32

34

36

38

40

42

44

46

4850

Property Price Index (1999=100)

Centaline Affordability Ratio, A ll Households (RHS)

Hong Kong - Property Price and Unemployment

0

50

100

150

200

250

300

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

01

2

3

4

5

6

7

8

Property Price Index (1990=100)

Unemployment Rate (Reverse Scale) (RHS)

Hong Kong - Real Property Price Index

Actual vs. Fair Values

(Jul 97 = 100, CPI adjusted)

20

30

40

50

60

70

80

90

100

110

120

1994 1997 2000 2003 2006 2009 2012

Actual Fair Value

Hong Kong - Consumption and Property Price

(y/y)

-10

-5

0

5

10

15

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

-50

-40

-30

-20

-10

0

10

20

30

40

50

60

Private Consumption Residential Property Price (RHS)

Sources: CEIC, ANZ




CHINA LIQUIDITY REPORT

China - PBoC Weekly Open Market Operations

(RMB bn)

-200

-150

-100

-50

0

50

100

150

200

250

25

Mar

08

Apr

22

Apr

06

May

20

May

03

Jun

17

Jun

01

JulC B Bill Matured Repo Matured Reverse Repo

CB Bill Repo Rev. Repo Matured

Net

Liquidity Injection

Liquidity Withdrawal

China - Weekly Maturing Repo and CB Bills

(RMB bn)

0

20

40

60

80

100

120

140

160

180

15

Jul

22

Jul

29

Jul

5

Aug

12

Aug

19

Aug

26

Aug

2

Sep

9

Sep

16

Sep

23

Sep

30

Sep

7

Oct

14

Oct

CB B ill Matured Repo Matured

China - 7-day Repo Rate

0

2

4

6

8

10

12

Jun

11

Aug

11

Oct

11

Dec

11

Feb

12

Apr

12

Jun

12

Aug

12

Oct

12

Dec

12

Feb

13

Apr

13

Jun

13

China - SHIBOR Fixing

0

2

4

6

8

10

12

Jul

11

Sep

11

Nov

11

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul

13

1-month 3-month 6-month

Sources: CEIC, Bloomberg, ANZ

Overall tightness will persist for a while

There were no matured funds in the open market last week, PBOC did not conduct any open market operations

(OMOs) as well. In the meantime, RMB50bn fiscal deposit was auctioned off last Thursday.

Generally speaking, the market interest rates should be relatively stable, with overnight and 7-day trading at

3.0-3.3% and 3.5-3.8% respectively, reflecting that overall tightness will persist for a while.

China’s M2 growth and new loans slowed in June

• China's new yuan-denominated lending in June stood at RMB860.5bn, up from RMB667.4bn in May.

The June figure was down RMB59.3bn from the same period last year.

• The country's social financing, a measure of funds raised by entities through bank credit and other

ways, amounted to RMB1.04 trn in June, down RMB742.7bn from last year.

• M2, a broad measure of money supply that covers cash in circulation and all deposits, increased

14% y/y, from 15.8% in May.

• The growth rate was down 1.8ppt from the level in May but remained 0.2ppt higher than that seen at

the end of 2012.

A slower M2 growth suggests that the PBoC’s liquidity tightness since mid-May has started to crack down on

shadow banking activities. As the central bank has set a 13% M2 growth target for this year, the liquidity

conditions are unlikely to improve significantly in the second half of the year.

Li-Gang Liu, Hao Zhou




FORECASTS

y/y, unless otherwise noted

Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 2013

Real GDP

China 8.9 8.1 7.6 7.4 7.9 7.7 7.5* 7.6Taiwan 1.21 0.59 -0.12 0.73 3.97 1.67 1.89 2.

Hong Kong 3.0 0.7 0.9 1.5 2.8 2.8 2.0 2.5

Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13

Consumer Price Index

China 2.5 2.0 3.2 2.1 2.4 2.1 2.7* 2.7

Taiwan 1.61 1.12 2.96 1.36 1.05 0.74 0.60* 0.26

Hong Kong 3.8 3.0 4.4 3.6 4.1 3.9 4.4 3.4

Producer Price Index

China -1.9 -1.6 -1.6 -1.9 -2.6 -2.9 -2.7* -

Unemployment Rate, %

Taiwan 4.21 4.20 4.16 4.18 4.19 4.19 4.18 4.17

Hong Kong 3.3 3.4 3.4 3.5 3.5 3.4 3.6 3.7

Exports

China 14.8 25.2 21.8 10.0 14.7 1.0 4.8 12.4

Taiwan 8.9 21.6 -15.8 3.2 -1.9 0.9 8.6* 4.0

Hong Kong 14.4 17.6 -16.9 11.2 9.0 -1.0 -4.8 -2.2Imports

China 6.0 28.8 -15.2 14.1 16.8 -0.3 9.6 8.4

Taiwan 1.6 22.2 -8.5 0.2 -8.2 -8.0 6.8* 3.0

Hong Kong 11.9 23.9 -18.3 11.3 7.7 1.7 -5.2 -1.7

Trade Balance

China, USD bn 31.6 29.1 15.2 -0.8 18.2 20.4 27.1* 34.3

Taiwan, USD bn 4.11 0.51 0.92 3.19 2.27 4.46 3.25* 3.30

Hong Kong, HKD bn -48.0 -27.5 -34.0 -49.1 -42.7 -44.3 -41.3 -40.9

PMI and Export Orders

China Manufacturing PMI 50.6 50.4 50.1 50.9 50.6 50.8 50.1* 50.5

Taiwan Export Orders 8.51 17.95 -14.47 -6.60 -1.11 -0.40 0.47 1.76

Industrial Product ion

China 10.3 - - 8.9 9.3 9.2 8.9* 9.2

Taiwan 5.96 2.10 19.30 -11.70 -3.00 -0.80 2.62 -0.66

Electricity Production

China 7.6 - 3.4 2.1 3.1 4.1 5.1* -

Retail SalesChina 15.2 - - 12.6 12.8 12.9 13.3* 13.2

Taiwan (Commercial Sales) 1.49 7.80 -6.00 -1.00 1.01 -1.85 -1.63 -3.19

Hong Kong 9.1 10.5 22.7 9.8 20.7 12.9 7.8 5.4

M1 Growth

China 6.5 15.3 9.5 11.8 11.9 11.3 9.1* -

Taiwan (M1 B) 4.91 3.97 5.66 6.03 5.72 7.04 - -

Hong Kong 15.9 20.2 13.6 17.6 15.5 18.9 - -

M2 Growth

China 13.8 15.9 15.2 15.7 16.1 15.8 14.0* 15.4

Taiwan 3.67 2.99 3.53 3.78 3.71 4.32 - -

Hong Kong 12.1 14.1 8.5 9.2 9.3 11.1 - -

2007 2008 2009 2010 2011 2012 2013

Current Account, % of GDP

China 10.1 9.3 4.9 4.0 1.9 2.3 -

Taiwan 8.9 6.9 11.4 9.3 8.9 10.5 -

Hong Kong 13.0 15.0 9.5 6.6 4.8 1.3 -

Foreign Reserves, USD bn

China 1,528 1,946 2,399 2,847 3,181 3,312 3500*

Taiwan 270 292 348 382 386 403 407*

Hong Kong 153 183 256 269 285 317 304*

Government Fiscal Surplus/Deficit, % of GDP

China 0.2 -0.8 -2.8 -2.5 -1.8 -1.5 2.0

Taiwan 0.9 0.9 -2.2 -1.2 -1.1 - -

Hong Kong (FY ending in March) 3.8 7.3 0.1 1.5 4.1 3.8 -

16 Jul-13 Sep-13 Dec-13 Mar-14 Jun-14

Foreign Exchange Rate

USD/CNY 6.137 6.17 6.20 6.23 6.25

USD/TWD 29.885 - - -

USD/HKD 7.758 - - -

Policy Interest Rate

China PBOC 1-year Lending Rate 6.00 5.75 5.75 5.75 5.75

Taiwan CBC Discount Rate 1.875 1.875 2.000 2.125 2.250Hong Kong Base Rate 0.50 0.50 0.50 0.50 0.50

Shaded cells and column refer to forecast; *Indicates actual released data.

Sources: CEIC, Bloomberg, ANZ

Forecasts

Forecast

36




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ANZ Greater China Economic Insight Incl Regional Chartbook - 16 July 2013

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